KeNo's Housing and Economic Portal: Wednesday November 11 Housing and Economic stories

TOP STORIES:

No Credit? No Problem as Auto Lender Taps Subprime Bond Appetite - (www.bloomberg.com) Skopos Financial, a deep-subprime auto finance company based in Irving, Texas, is packaging $154 million of loans made to borrowers with weak credit -- and some without a credit score -- into bonds rated investment grade. More than three-quarters of the loans backing the deal are to borrowers with credit scores under 600 and another 14 percent have no credit score at all, according to a pre-sale report by Kroll Bond Rating Agency. That would place the bulk of the obligations well below what’s typically considered good credit. The offering is the latest prepared by privately backed auto lenders that offload their risk into securities bought by institutional investors. Skopos, which is backed by Lee Equity Partners LLC, the New York-based private equity firm started by Thomas H. Lee, has only been in business since 2012.

How The US Government Is Raiding A Citizen Victim Relief Fund To Pay For General Expenses – (www.zerohedge.com) The government’s just-approved budget deal takes $1.5 billion from a fund for crime victims and uses it instead to help pay for federal spending, drawing on a growing reserve collected from settlements with banks and major corporations. The unprecedented transfer, part of closed-door negotiations between the Obama administration and congressional leaders, has raised the ire of advocates. They say it violates the integrity of a decades-old program that funds safe havens for domestic violence victims, counseling for abused children and financial aid for murder victims’ families, among other programs. The administration and Republican congressional leaders averted a partial government shutdown by striking a two-year budget deal approved by Congress last week. As part of the pact the Crime Victims Fund will lose $1.5 billion to the general treasury, Obama administration officials said. Since the fund’s creation in 1984 by the Victims of Crime Act, it has gathered money from fines imposed on criminals and set it aside to pay for services for crime victims.

Paul Singer Says Aug. 24 Shows Stock, Bond Markets Are 'Unsound' - (www.bloomberg.com) Paul Singer, the billionaire founder of $27 billion hedge fund firm Elliott Management, said stock and bond markets are structurally “unsound” as evidenced in recent market volatility. In a wide-ranging letter that warned of the effects from low interest rates, unrest in the Middle East, and leverage in the financial system, Singer, 71, said steep declines and rapid recoveries in financial markets, such as the Aug. 24 stock market slump, and recent flash crashes in bond markets, probably foreshadow the future. “All of the innovations and complexity in the modern world of finance combine in different ingredients at different times with different catalysts to create fragility, not stability,” he wrote in a note to clients dated Oct. 27. “We wonder if the overall impact of financial innovation, including derivatives, structured products, high frequency trading and communication advances, is net negative, albeit with a possibly long delay before the drawbacks become visible.”

Hidili Says Not in Position to Pay Bonds as China Defaults Mount - (www.bloomberg.com) China faces another test in its credit markets this week after a coal firm signaled it may default on its dollar debt. Hidili Industry International Development Ltd. is not in a position to repay $190.6 million of principal and interest due Nov. 4. on its 8.625 percent notes, it said in a statement Friday. The mining company based in the southwest province of Sichuan has defaulted on some of its 6 billion yuan ($947 million) of loans, it said. Hidili has hired UBS Group AG to advise on bond restructuring, according to the filing. Defaults at China’s companies, the world’s biggest corporate borrowers, have spread this year amid the weakest economic growth in a quarter century that’s hurt commodities and manufacturing. Coal trader Winsway Enterprises Holdings Ltd. failed to pay interest on dollar bonds for a second time this year in October. Defaults are also rising onshore, where manufacturing firms accounted for four of the five major bond failures this year.

China's `Hedge Fund Brother No.1' Is Now Target of Insider Probe - (www.bloomberg.com) Xu Xiang, who led Zexi Investment’s ascent to the top of China’s money managers, is known in the country as "hedge fund brother No. 1" and inspired both awe and skepticism among peers for his knack of timing swings in volatile stocks. Xu, the latest target of the government’s crackdown following a $5 trillion summer stock market rout, is facing a probe for alleged insider trading and stock manipulation, according to state media. Xinhua News Agency on Sunday reported that Xu had been detained by the police. On Sunday, Shanghai police took away computers and other material from Zexi’s office, according to a building management official who asked not to be identified. China is intensifying probes into strategies authorities suspect may have exacerbated the selloff that started in June. Two executives at Yishidun International Trading and the technical director at Huaxin Futures were arrested after a police investigation showed they made 2 billion yuan ($316 million) in “illegal profit," Xinhua reported on Sunday, citing the Ministry of Public Security.

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